It’s clear that you can negotiate the debt settlement process on your own. But are there cases that hiring debt settlement experts is a better option?
Well, below are situations that are best handled by experts for the best desired outcome.
If you are not an experienced negotiator, it would help to hire specialists. Debt collection agencies and creditors have interacted with many debtors and it takes a lot to convince them to allow debt resettlement. If you are not good, you will lose time and not achieve your goal.
You’ll also need to exhibit confidence to negotiate. If you don’t have and can easily be intimidated, just look for a company to represent you. They have a track record of helping hundreds of people, know how to answer possible questions, and can make a good offer and present it professionally.
If you are squeezed in for time, do not do it yourself. A successful debt settlement process takes somewhere between 3 to 4 years. It requires patience and perseverance and if this is not your area of expertise, you can grow weary and even get depressed. And debt settlement firms can help you as you devote time to making more money and saving.
But while this seems a great idea to save your time and avoid intimidation, it is likely to have some serious consequences that you have to brace yourself for. The obvious one is that your interest and late fees can increase substantially.
How Does a Credit Card Settlement Affect Your Credit Score?
The long term implications of credit card settlement can be damaging.
Hurrah! You’ve succeeded in paying less than you owed the credit card issuer. For a whole seven years your credit score and credit report will be damaged. During this time, your account will read settled, meaning that you did not pay the full amount.
This information will be visible to your next lender. If you apply for a loan or credit card, your lender will see this and use it to give a loan or decline. In most cases, lenders won’t want to associate with a person who may not settle the debt in full and on time.
Is It Better To Settle For a Credit Card Debt or Pay in Full?
The easy, short-term, simple answer is, settle for a credit card debt.
However, looking at all angles and in the long term, it is better to pay the amount in full. Any settled amount on your account still reads as negative. And this state remains that way for seven years, and may scare off potential lenders.
When you pay the debt amount in full, it will have positive implications of your credit report and credit score. This positive remains on your account for ten years. You’ll attract potential lenders without much hassle, most of the time and meet your financial goals faster.
But the bottom line is, if you are squeezed financially, say you’ve lost a job or have closed down business, a settlement is far much better than filing for bankruptcy.
If you are not sure what to do with your situation, your should seek the services of a credit counselling organization. They will paint the picture better and help you in outlining the best repayment plan.
How to Select the Best Debt Resolution Company
When debt settlements seems to get out of hand and you are behind your bills every month, you should consider the services of a debt relief company. You need to make sure that the company is legit and its services are reliable.
Most debt relief companies are experienced in handling debts, including student loans and will help you regain your financial independence. They have credit counsellors and financial advisors who will keenly assess your situation and determine whether you qualify for debt relief.
Such credit counseling organizations, will help you come up with a payment plan that is agreed upon and a savings plan that you can sustain. At the right time, they’ll try to negotiate with your creditor and if your credit standing is good, you’re likely to get the relief.
Reputable debt relief firms like National Debt Relief have good working relationships with many credit card companies, making it easier for you to settle the debt.
What are the Non-Negotiables in Debt Relief Companies?
A good debt settlement company should exhibit the following qualities:
- Policies surrounding the credit card settlement are written down, are clear and easy to understand
- Is transparent in providing the intended results but does not over-promise or guarantee the outcome. After all, they are third parties negotiating with a creditor who has no obligation to accept the debt settlement. Debt settlement companies guaranteeing results are likely to be scams.
- Provides all the information you need about the program costs and fees before you sign up. Legit firms will not mount pressure on you or suggest fixed deadlines, etc.
- Is able to make professional judgment, that is, can provide a realistic estimate about the possible time it will take before approaching the creditor with an offer.
- Will allow you to be actively involved in the process and send all debt relief offers to you for approval.
- Will tell you the amount of money you need to save up before they can make the offers.
- Has a good track record with other clients. It helps to look at the independent reviews of their past customers.
How to Prepare Yourself for Debt Resettlement
Since you’ve chosen debt resettlement, you’ll need to make necessary preparations towards negotiations. Credit card resolution companies usually provide the amount you need to save up per month for the ultimate lump sum payment to your credit card company.
The savings account will bear your name but is issued by the Federal Deposit Insurance Corporation (FDIC) and overseen by a third party trustee or account administrator.
Credit Card Debts Negotiation
When you dutifully make your monthly payment, your debt resolution company may now make settlement offers with your credit card company. You should keep in mind that you have the final say on the terms of the offer.
Signing the Credit Card Settlement Agreement
If the lump sum is enough and you accept the debt management program, you should sign agreement and settle your debt.
Frequently Asked Questions
How will debt settlement programs impact on your credit scores and credit report? Credit settlement will reduce your credit score and card rating. Paying less amount that you owe your creditors is seen as inability to honor your financial obligations, reducing your eligibility for future loans and credit cards.
Can debt collectors sue me if I don’t pay my debts? Yes. Your creditors’ business depends on the amount you owe them and your repayment. So, they can have a court judgment against you if you fail to pay. To avoid that, you can seek better debt management ways such as a relief.
How will debt settlement affect my interest rate? During debt settlement, you’ll stop the monthly payments to the credit card company. This means, that your interest will continue to accrue. Combined with the late fees, the interest rate may increase.
How can I maintain a good credit score? The best way to maintain good credit score is full repayment of the debt to your credit card company. This positive credit scores will remain for ten years. You should pay less than the full debt when it’s the only option.
I owe my creditors but I don’t know the best way around it. What can I do? You should seek a reliable credit counseling organization with experience credit cards resolution. They’ll assess your financial situation and credit cards obligations. With this settlement company, you’ll come up with a viable plan to clear the debt and improve your credit scores.